Getting approved for a home loan isn't getting easier, but it doesn't appear to be getting much more difficult, either.
In its quarterly survey to member banks, the Federal Reserve asked senior bank loan officers whether “prime” residential mortgage guidelines had tightened in the last 3 months.
Nearly 50 percent of banks said guidelines tightened last quarter, a much lower figure than during all of 2008 and a signal that mortgage lending may be turning a corner.
Guidelines remain restrictive, however.
Versus 18 months ago, lenders subject would-be borrowers to all of the following:
- Higher minimum credit score thresholds
- Larger minimum down payments
- Lower debt-to-income requirements
- Mandatory fees based on certain loan traits
In addition, the availability of subordinate financing has all but disappeared when a home's loan-to-value exceeds 80 percent.
Combined, these changes preclude a lot of Americans from getting access to today's low rates but that could change in the coming months if the Fed's reported trend continues.
Some experts believe that credit tightening started the recession. Credit loosening, therefore, could help lead us out.